MARKET CLOSE: Nasdaq posts strong gains; blue chips flat

Jan. 2, 2002 4:43 p.m. PT

Despite layoffs at Nortel and lower guidance from Yahoo!, investors jumped on technology stocks Thursday, pushing the Nasdaq up 116 points to 2,640.56. The Dow Jones industrial average moved up 5 points to finish at 10,609.55.

Analysts said Thursday’s rally marks a significant turning point for the beleaguered tech sector.

“Yesterday looked good, and the fact that a lot of stocks aren't going down on bad news anymore indicates to me we're in the process of making a near-term bottom,” said Larry Rice, chief investment officer at Josephthal Lyon & Ross.

Investors were further encouraged by comments from Federal Reserve Bank of Philadelphia President Anthony Santomero who said he sees no evidence the U.S. economy has stopped growing and he predicted activity would pick up in the second half of 2001.

Speaking to the Greater Philadelphia Chamber of Commerce about the U.S. economic outlook, Santomero said he expects “somewhat slower” growth in the first half of the year compared to the boom of the last few years.

“I am still seeing figures that are positive in terms of growth rates,” Santomero told reporters after his speech. “The data that I have seen does not suggest that we are in a situation of zero growth rate.”

Investors are hoping the Fed will cut interest rates by at least one-quarter point later this month.

Yahoo shed $4.50 to $26 after warning that its 2001 sales and earnings will fall well short of analysts’ estimates.